The acquisition of doorstop lender Provident Financial by Non-Standard Finance (NSF) is being investigated by the Competition and Markets Authority (CMA), as the watchdog has concerns that the merger would decrease competition.

NSF has sought to address these concerns by offering to sell its home credit division, Loans at Home, as part of a proposed demerger. The shares in the demerged Loans at Home would be allocated to the shareholders of NSF.

If the deal is approved, this would mean the shareholders in the enlarged NSF and Loans at home would be the same immediately after the demerger. In light of this, the CMA is investigating whether the demerger would remove the overlap in the home credit market.

In response, NSF’s chief executive John van Kuffeler commented: “We are pleased to announce another important milestone in our offer today. We remain confident in the merits of our offer and the benefits it will bring for Provident, its customers, employees and shareholders.”

However, Provident Financial’s response was far from positive. Its board said the CMA’s announcement introduces “a far greater degree of uncertainty for the NSF offer than previously indicated by NSF.”

“The Provident board believes that Provident Shareholders are not able to assess or even estimate the full economic consequences of the NSF Offer and therefore the NSF board should show due consideration to all Provident Shareholders by allowing it to lapse,” the company added.

What do shareholders think?

Provident Financial counts a number of well-known investors amongst its ranks. They include Neil Woodford (pictured), manager of the Woodford Equity Income fund, alongside Mark Barnett, who runs the Invesco Perpetual Income fund.

While Woodford and Barnett support NSF’s proposed takeover, M&G Investments – another shareholder –  intends to vote against the deal.

In early May, Schroders’ fund manager Kevin Murphy and the firm’s global head of stewardship Jessica Ground warned that the rights of minority shareholders were not being protected.

Investors in Provident Financial have experienced a challenging ride over the past two years. Its shares have fallen from a peak of £23 in mid-2017 after it warned the market that it needed to restructure its doorstep lending division, which would hit profitability. Today, the shares trade at £4.62.